An activity based cost management approach in the public sector : a review

Abstract

In the past two decades, the Maltese public sector has experienced a major transformation in turn superseding traditional administrative norms by innovative styles of management which eventually shifted the focus more strictly on results, measurement, value-addedness, and performance; in which cost-accounting plays a crucial role. This research study examines the extent to which Activity-based Cost Management (ABCM) practices are adopted by Maltese public sector organisations. Activity-based Costing (ABC) had originally been introduced by the private sector; but was later embraced by the public sector as an analytical tool that can be used to improve the efficiency of government operations. The research covers a study population comprising chief executives, senior and middle managers entrusted with financial policy formulation and implementation. Qualitative data was collated by means of an online Likert-type questionnaire open to all respondents, followed by points of discussions to afford further elaboration vis-à-vis ABCM implementation in a public sector setting. Results reveal respondents’ opinions differentiated by four (4) categorical objectives, ie. (i) extent of cognisance/exposure to ABC (ii) level of implementation (iii) alternatives being adopted and (iv) effectiveness of alternatives compared with ABCM. Conclusions reveal that although most have been exposed and in favour of ABCM it is not being fully implemented. This does not imply that other forms of activity-analysis and variants do not prevail. ABC continues to be a source of interest for many practitioners, academics and consultants in the public sector.